9911796707
TMI Blog2024 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... on of assessee not considered. HELD THAT:- As observed that the assessee has borrowed loan from various financial institutions against the mortgage of properties at the rate of interest more than 12% p.a. and since the interest earned from various parties is at the rate of 12% p.a., the assessee has restricted the claim of interest expense u/s. 57 of the Act to 12%. So far as passing reference of notional rent in his order u/s 263 of the Act, the AR stated that the assessee has disclosed rental income from the property - Mayuresh Elanza in his return of income which is Rs. 23,35,200/-. The same is verified with the copy of return of income filed and found to be correct. Thus, the contention of PCIT relating to notional rent is also factuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the Assessing Officer (hereinafter referred to as AO ) under Section 143(3) of the Act has been set aside on the grounds that the order was erroneous and prejudicial to the interests of the Revenue. Facts of the case: 2. The assessee is an individual and filed his return of income for the A.Y. 2017-18 on 01-08-2017 declaring total income of Rs. 33,84,400/- and agricultural income of Rs. 4,23,572/-, which was processed u/s. 143(1) of the Act. Later on, the case was selected for the scrutiny under CASS by issuing notice u/s. 143(2) of the Act. During the course of assessment, the AO observed that the assessee has borrowed some amounts from various parties amounting to Rs. 2,23,54,000/- and total income under all heads of income amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, citing that the interest expenses were incurred for earning interest income. The PCIT noted that the assessee failed to substantiate the nexus between the interest-bearing loans taken from financial institutions and the advances made to group companies or relatives. The interest rate of loans borrowed (12.75%) was higher than the interest earned (12%), resulting in an excess claim of Rs. 7,48,718/-, for which no satisfactory explanation was provided. The PCIT also concluded that the AO failed to make proper inquiries or verifications during the assessment, resulting in an erroneous order prejudicial to the interests of the revenue. Therefore, PCIT issued notice and passed his order u/s. 263 of the Act. 3. Aggrieved by the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue regarding the Interest claimed against the rent income and allowed the same. On the revised grounds of appeal: 3.2. During the course of hearing before us, the Authorised Representative (AR) of the assessee stated that the assessee is a Director in the companies to whom he has advanced loans on interest at the rate of 12% p.a. and the assessee has borrowed these funds from various finance companies at the interest rate of 12.75%. The AR also stated that the assessee has not claimed the excess interest of Rs. 7,48,718/- as concluded by PCIT. To support his contention, the AR submitted the detailed statement of interest paid and received and reconciled the same with the computation of income. The AR argued that the AO has already inquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y if the order passed by the AO is both erroneous and prejudicial to the interests of the Revenue. To satisfy these conditions, the PCIT must demonstrate that the AO failed to conduct proper inquiries or verifications which should have been made in the assessment proceedings. Upon examination of the records, it is evident that the AO issued notices under Section 142(1) of the Act dated 13-08-2019 and 11-11-2019, specifically questioning the allowability of the interest claimed under Section 57(iii) of the Act. The AO asked the assessee to provide details of the loans and advances, the rate of interest charged, and other supporting documents. The assessee responded to these notices with detailed submissions, including a reconciliation of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Credit Co. Ltd. 5494641 4056026 4 Interest Paid to HDFC 130469 130469 Total Interest claimed u/s 57 4933577 5.3. It was observed that the assessee has borrowed loan from various financial institutions against the mortgage of properties at the rate of interest more than 12% p.a. and since the interest earned from various parties is at the rate of 12% p.a., the assessee has restricted the claim of interest expense u/s. 57 of the Act to 12%. 5.4. So far as passing reference of notional rent in his order u/s 263 of the Act, the AR stated that the assessee has disclosed rental income from the property - Mayuresh Elanza in his return of income which is Rs. 23,35,200/-. The same is verified with the copy of return of income filed and found to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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